The ideas that the US Department of Agriculture is poised to
lift forecasts for grain inventories only gathered strength over Monday.

In fact, it was difficult for commodities to make headway
anyway, given poorly-received Chinese trade data, showing declines in both
exports and importers for a country which is a huge consumer of raw materials.

The CRB commodities index dropped 0.5%.

But grains did worse, with corn for March delivery dropping 0.8% in Chicago to $7.30 a bushel,
and March wheat falling 1.4% to
$8.48 ¾ a bushel – its lowest finish since July.

Cold and snow

Indeed, wheat's worsening technicals, with price slippage testing
the floor of the trading range futures have trod for some five months, were
viewed as largely to blame for the extent of its slide, despite some
fundamental news which might have been deemed supportive.

The US weather outlook is a mixed bag, with cold conditions
on their way, potentially testing dryness-challenged winter wheat seedlings,
but some snow/moisture in the mix too for at least part of the US Plains, where
drought issues are most pronounced.

By December 14 a low pressure formation "will be centred
over central or eastern Kansas and tracking up towards the Great Lakes,"
weather service WxRisk.com said.

"This low could bring several inches of snow to portions of
the central Plains and the western Corn Belt, possibly even to Chicago."

'Looks dry for the next
three days'

Export news appeared largely supportive, with the USDA
revealing the sale of 115,000 tonnes of wheat to Egypt, the world's top importer.

Furthermore, US weekly exports, as measured by cargo
inspections, were OK, at 13.9m bushels, if down from 14.6m bushels the previous
week.

And Argentina is
reported to have, or be about to, cut its ceiling for wheat exports to 4.5m
tonnes, from 6m tonnes, thanks to a rain-beset harvest - although a drier spell
is blessing farmers at teh moment.

"All of Argentina looks dry for the next three days as does
most of western and central Paraguay," WxRisk.com said, if foreseeing rains
returning next week.

'Overly optimistic'

Even so, it was not enough to impress investors.

"The wheat market fretting that international buyers have completed
their January buying," said Richard Feltes at RJ O'Brien, adding that corn prices were being "pressured by
reports that Asian buyers largely covered through February".

And then there is the prospect of a USDA upgrade in its
Wasde to the USDA estimate for wheat stocks, even if analysts expect a rise of
only 8m bushels, to 712m bushels.

Will that prove too low?

"Given that crop prices are generally lower, one can
conclude the average trade estimates are being seen as overly optimistic and
that ending stocks forecasts are more likely to be above what's expected than
below," broker Doane said.

Disappointment
against forecasts

Corn's better performance reflected technical signals which
were not quite as negative, with the grain remaining well-ahead of the September
levels revisited last month.

Furthermore, "there are still many that feel that US corn export
sales," which have made a dismal start to 2012-13, "will pick up substantially
after the first of the year as the South American supplies have dried up", Darrell
Holaday, at broker Country Futures, said..

"But this has been expected over the last 30 days and the
results have been way less than poor."

Indeed, weekly cargo inspections came in at 7.9m bushels –
less than one-quarter of those a year before.

And South Korea, a major corn buyer, excluded US supplies
from its latest tender.

Speculative
positioning

Also to factor in was a "big
gain" in managed fund long positions in corn, "which are now nursing losses",
Mr Feltes said.

The net long in Chicago corn held
by managed money, a proxy for speculators, rose by nearly 22,000 lots to more
than 279,000 contracts, the CFTC market regulator said late on Friday.

This suggested to some investors
overbuying of a grain whose US inventory numbers are expected to be nudged up
16m bushels to 663m bushels in the Wasde.

It was left to soybeans
to fly the flag for bulls, which it managed without any great elevation, adding
0.2% to $14.74 ¾ a bushel in Chicago for March delivery.

And, after all, the Wasde is to
cut estimates for US inventories of the oilseed, as of the close of 2012-13, by
10m bushels to 130m bushels, according to a Reuters survey of analysts'
expectations.

The forecast of reduced stocks
reflects strong domestic demand, of which more will be known on Friday, with
the US National Oilseed Processors Association monthly data.

Also, exports continue to
impress, with inspections for last week hitting 46.6m bushels, down more than
5m bushels week on week, but well ahead of the 29.9m bushels in the same week a
year before.

'Don't see much potential for the upside'

Among soft commodities, New York
raw sugar for March tumbled 2.3% to
18.76 cents a pound – the weakest finish for a spot contract since August 2010 –
after Unica, the cane industry group, hinted at an upgrade to estimates for the cane crush in Brazil's key Centre South region in 2012-13.

The comment came in a report in
which it revealed bumper output in the second half of November, boosted by dry
weather which has allowed mills to stay open longer than usual.

The forecast followed an upgrade
by Kingsman on Friday to its estimate for the world surplus in 2012-13, besides
CFTC data showing speculators have covered many of their short holdings in the
sweetener, so reducing the risk of a price spike from a round of position
covering.

"With scarce news on off-take,"
ie end user buying, "and the development of the northern hemisphere beet crops
adding to the producer pressure from Thai and Brazil producers, we don't see
much potential for the upside for the time being", Nick Penney at broker Sucden
Financial said.

Huge crop ahead?

And New York arabicacoffee also dropped to a two-year low, the weakest finish since
June 2010, a major Brazilian grower and exporter forecast a large 2013-14 crop.

Brazil, the top coffee grower,
will produce 53.4m bags of coffee, Terra Forte said, a rise of 2% on the forecast
for this year even though next season is an "off" on in the two-year cycle of higher
and lower production.

March futures dipped 4.4% to 147.00
cents per pound.

"This move has produced some
encouraging volume today of around 18,000 lots, but it has been the case that
in recent times that after a surge like this there can be a lull in trading over
the next few days," Sucden said.